Sunday, 27 March 2022 18:40

Types of consumer credit

Written by Evelyn Alas

Credit cards

They are an example of revolving credit, which provides you with a line of credit, that is, a total amount on which you make purchases and payments. The main characteristic of a credit card is its temporary nature, since it allows you to use money that you do not have at the moment but that you will receive in the immediate future.

For example, if you make a purchase and you know that you will be able to pay it off once you receive your salary. If you use the card with this in mind, you can become a customer who pays off his debt each month without allowing interest to accrue.

Store or supermarket credit cards are another variant of the credit card, and in some cases, can only be used for purchases at their establishments. These cards can work for purchases of durable goods, such as household appliances or electronic equipment with promotions or benefits exclusive to that store. In both cases you can take advantage of interest-free month promotions and other additional benefits; consult and compare which card best suits your needs.

We recommend that before applying for any card, always check the total annual cost, interest rate, commissions, promotions and other benefits, as well as other terms and conditions.

Free investment loans

These are open credits that are not tied to a specific purpose. This means that when you apply for it you do not have to explain what you will use it for and you can also split it into different objectives.

For example, you could use a part for remodeling and another part for a trip. They are offered by banks, financial institutions and there are even companies dedicated exclusively to granting them. You can use them to go on a trip, remodel your house or open an investment account. Basically, for whatever you want, since you are not usually asked to declare what you will use the money for.

As a precaution, make sure it is a reputable company and review the stipulations of your contract before signing. As with credit cards, consult, compare and review the total annual cost, annuity, commissions, as well as all terms and conditions. Also prepare your budget and verify your ability to pay.

Specific credits

Many institutions offer specialized financing, for example, mortgage, educational and automotive loans, among others. This means that the amount you are offered can only be used for one purpose and you must be able to prove that you used it for that purpose.

The advantage of these loans is precisely their specialization, since the amounts and payment plans are designed according to the purpose. Check the different alternatives very well before contracting and calculate the percentage of interest that you will be charged.

Payroll loans

These are very similar to free investment loans, except that in this case it is essential that you receive your salary payment through a payroll account in a bank. Thus, the institution can grant you an amount based on the salary you receive each month and will deduct the payment directly from your account.

Loan for durable consumer goods

The utility of this loan is related to the acquisition of goods that have a commercial value and a determined useful life, such as automobiles, computer equipment, household appliances, furniture and equipment. They are granted to supplement the shortfall to acquire them, that is to say, the borrower must contribute a percentage of the total cost and the bank lends the remainder. These assets may sometimes serve as collateral for the loan.